HMS Astute, one of the British Royal Navy’s nuclear hunter killer submarines
Photograph: Andy Buchanan/AFP/Getty Images

Defence secretary Gavin Williamson is set to give the go-ahead for £2.5bn in spending on the UK’s submarine programme, including its nuclear fleet.

The work had already been agreed in principle but Williamson will confirm the Ministry of Defence has signed a £1.6bn contract with BAE Systems to build the seventh and last of the Astute hunter-killer submarines, to be named Agincourt. It is scheduled for handover to the Royal Navy in the mid-2020s.

He will also confirm that a further £960m worth of contracts has been signed for the next phase of construction of four Dreadnought submarines to replace the four Vanguard submarines that make up the UK’s nuclear fleet, carrying the Trident weapons system.

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The contracts will cover work over the next 12 months.

The Dreadnoughts, work on the first of which began in October 2016, are not due to enter service until the 2030s, and are predicted to remain operational at least through to the 2060s.

The UK’s parliamentary spending watchdog, the public accounts committee, on Friday warned of a £21bn shortfall: in other words, the Ministry of Defence does not have enough money to buy all the equipment it says it needs. It singled out for criticism spending on the four Dreadnoughts.

In spite of the huge squeeze on the ministry’s budget, the nuclear deterrent and the rest of the submarine programme has been ringfenced.

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Williamson is scheduled to make the announcement at BAE Systems in Barrow-in-Furness, Cumbria, where the Astute submarine is to be built.

Williamson will say: “Agincourt will complete the Royal Navy’s seven-strong fleet of hunter-killer attack subs, the most powerful to ever enter British service, whilst our nuclear deterrent is the ultimate defence against the most extreme dangers we could possibly face.”

Cliff Robson, BAE Systems submarines managing director, said: “Securing this latest funding for our submarines programmes is excellent news for BAE Systems and the 8,700 employees in our submarines business, as well as our local community in Barrow and the thousands of people across our UK supply chain who help deliver these nationally important programmes for the Royal Navy.”